Fund for private electric sector of Latin America and the Caribbean set up

(Caracas, February 7, 1994). -- CAF made a US$25 million contribution to the Scudder Fund for Private Electric Energy in Latin America which makes high- return investments in the independent electricity sector of the region.

The agreement was signed today in CAF headquarters in Caracas by CAF President & CEO Enrique García in the presence of Luis R. Luis, Scott Swensen and John Nofthrue, representatives of the firm Scudder, Stevens & Clark.

The basic objective of the Fund is to stimulate development and strengthen private electricity producing utilities. The Fund will invest in electric power projects in the private sector which sell electricity to industrial users and transmission and distribution utilities through long-term contracts.

Most of the investments will be made as equity participation, although other financial facilities can be used; in this way, the Fund also collaborates with the development of capital markets.

The Scudder Fund will be initially formed by four partners with equal equity. In addition to CAF, the other partners are two of the most important electric power utilities in the United States (CMS Energy Corp and NRG Energy Inc), and International Financial Corporation, multinational organization of the World Bank group, whose objective is to stimulate the economic growth of its member countries to promote private investment.

Benefits for Latin America CAF is formed by the five countries of the Andean Group: Bolivia, Colombia, Ecuador, Peru and Venezuela, as well as Mexico and Chile, and soon Trinidad and Tobago, among its shareholders.

CAF member countries are making important efforts to increase electricity supplies through the correct selection of sources and improved levels of efficiency.

During the signing of this agreement, the CAF president said the Scudder Fund would bring undoubted advantages to the Andean countries. "It is an effective mechanism for generating external funds and mobilizing them into projects in the electricity sector considered priority by the Corporation, given their importance in the economic opening scheme adopted by Latin American nations."

García said the Fund’s area of action - Latin America and the Caribbean - is part of CAF policy in the sense of "establishing effective and pragmatic channels of communication to contribute to continental integration," and paying more attention "through privatization of electricity utilities to the needs of the renewed productive base and improving the quality of life of the population."

He added that CAF’s direct presence in the direction of the Fund and in the evaluation and approval of the projects to be financed increases the possibility of attracting investments into the sector, because individual access to credit by private promoters is usually more difficult.

The US partners NRG Energy Inc. is a subsidiary of Northern States Power Company, which serves three million commercial, industrial, municipal and residential subscribers in five states. The company has managed construction of 22 thermoelectric plants, three repowering projects, two nuclear and various hydroelectric plants.

NRG is an independent power generator which specializes in the design, construction, operation, maintenance and ownership of power plants.

CMS Energy Corporation operates in 12 countries, including Ecuador, Colombia and Argentina, and has over 100 years of experience in the electricity and gas area.

The Fund will be managed by Scudder, Stevens & Clark, investment and management services firm founded in 1919, which specializes in managing investment of assets for pension funds, foundations, corporations and investment banks.

A part of the investments which the firm manages are located in Latin America.